What Deals Look Like in the Midwest
The average early-stage deal in Kansas City in 2015 was valued at $3.5 million. That’s one of the findings of the Midwest Technology Company Seed Financing Survey, released in April of this year.
The study looked at characteristics of investments completed in 2015, roughly between $500,000 and $3 million, in the technology space. The survey included about 40 seed financing transactions for companies located in Nebraska, Kansas and Missouri.
“Frequently we hear entrepreneurs talking about terms and valuations on the coast. We thought it was important to get a handle of what deals look like in this region,” said Maria Meyers, director of the UMKC Innovation Center and founder of KCSourceLink. “We hope this information will help entrepreneurs and investors have better discussions and get deals done.”
The survey looked at common stock, preferred stock and convertible debt. Some highlights:
- Average pre-money valuation: $4.7 million
- Average amount raised: $700,000
- Percent of equity to investors in the round: 20% median
- 85% established an options or incentive units pool for key employees prior to the investment
- 88% provided a board seat with voting rights to the investor
- 24% required founder vesting; median length 3 years
- Average pre-money valuation: $2.5 million
- Average amount raised: $500,000
- 58% established an options or incentive units pool for key employees prior to the investment
- 42% provided a board seat with voting rights to the investor
- 8% required founder vesting
- Median amount of financing raised: $550,000
- 64% had a valuation cap
- 9% provided a board seat with voting rights to the investor
Click on Midwest Seed Finance 2015 report to download the entire report.